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Barings bid to sell MphasiS stake hits a price wall
By agencies
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Wednesday, 24 August 2005, 19:30 IST
MUMBAI: Private equity firm Barings? attempt to sell its 35 percent in MphasiS-BFL appears to have stalled with prospective buyers such as Singapore?s Temasek baulking at the high asking price.
Days of hectic negotiations have failed to bridge the gap in valuations. Industry sources said a final decision whether to go ahead with the sale at a lower-than-expected price will be taken in a day or two.
Barings wants to sell its stake in the Bangalore-based MphasiS in a deal that would have yielded over 
7 billion at the current price. The firm began the process in May through merchant banker Standard Chartered, while bidders such as Temasek, Carlyle, Hinduja TMT and Capgemini had shown interest.
But after more than three months of negotiations, the process appears to have reached something of a dead end. Temasek?s offer of about Rs 250-260 per share has already expired and Barings is reluctant to sell to Hinduja TMT due to opposition from the firm?s management headed by former Citibanker Jerry Rao.
Last week there were rumors of a last-minute entry by a strategic bidder such as Tata Consultancy or Capgemini, but it doesn?t appear to have altered the situation considerably.
Barings bought into both MphasiS and BFL Software separately in the 1990s and then merged them in ?00. The private equity firm has been looking to sell its stake for some time to realize gains and also because the tenure of the fund, which holds the MphasiS shares, expired last year. It was extended by one year, December ?05, to facilitate a sale.
Industry sources said the sticking point in the sale process was Barings? asking price of about Rs 280-Rs 300 per share, which put off many bidders.
Temasek, for instance, was not willing to bid above Rs 260 per share saying, among other things, that the company?s FY06 EBITDA estimate of about Rs 1.65 billion did not justify such a high asking price.
Barings will be in a difficult position if the sale does not go through. It will have to examine other alternatives to dispose off its stake. An ADR issue is an option, but some analysts point out the fact that selling 35 percent in the ADR market would not be feasible.
7 billion at the current price. The firm began the process in May through merchant banker Standard Chartered, while bidders such as Temasek, Carlyle, Hinduja TMT and Capgemini had shown interest.
But after more than three months of negotiations, the process appears to have reached something of a dead end. Temasek?s offer of about Rs 250-260 per share has already expired and Barings is reluctant to sell to Hinduja TMT due to opposition from the firm?s management headed by former Citibanker Jerry Rao.
Last week there were rumors of a last-minute entry by a strategic bidder such as Tata Consultancy or Capgemini, but it doesn?t appear to have altered the situation considerably.
Barings bought into both MphasiS and BFL Software separately in the 1990s and then merged them in ?00. The private equity firm has been looking to sell its stake for some time to realize gains and also because the tenure of the fund, which holds the MphasiS shares, expired last year. It was extended by one year, December ?05, to facilitate a sale.
Industry sources said the sticking point in the sale process was Barings? asking price of about Rs 280-Rs 300 per share, which put off many bidders.
Temasek, for instance, was not willing to bid above Rs 260 per share saying, among other things, that the company?s FY06 EBITDA estimate of about Rs 1.65 billion did not justify such a high asking price.
Barings will be in a difficult position if the sale does not go through. It will have to examine other alternatives to dispose off its stake. An ADR issue is an option, but some analysts point out the fact that selling 35 percent in the ADR market would not be feasible.